"The policy front is still the biggest risk to the property industry," said Zheng Tuo, president of Good Hope Equity Investment Co. in Shanghai. "Given the importance of property to China's economy, investors are wondering if economic growth may be impacted next year."

The Shanghai Composite Index lost 72.45, or 2.3 percent, to 3,050.52 at the close, the lowest since Oct. 30. The measure has dropped 4.5 percent this month as the government increased down payments on land purchases and a flood of share sales diverted funds from equities. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, fell 2.7 percent to 3,305.54.

Zhou said at a Beijing forum that reserve ratios are a tool "which we still put quite some emphasis upon," fueling speculation they may be increased to limit the risk of asset bubbles. Imbalances in international payments can require "sterilizing" extra money in the financial system, he said.

Record Loans
A record 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of this year drove a recovery in the world's third-biggest economy and increased the risk of bubbles in property and stocks. The Shanghai gauge has rallied 68 percent this year.

Zhou didn't say a reserve-ratio increase was imminent. He also said that policy makers had many tools at their disposal, including "policy rates," interest-rate spreads and capital- adequacy ratios. China can tolerate a "certain level" of inflation because the economy is in transition and needs reforms, including of energy pricing, Zhou said. Policy makers won't be overly rigid in targeting consumer prices, he added.

'Excessive' Growth
The government will target "excessive" growth in property prices in some cities, Xinhua News Agency reported last week. That follows the cabinet's statement that it will re-impose a sales tax on homes sold within five years, after cutting the period to two years in January.

Home prices in 70 major Chinese cities, including Shanghai, rose 5.7 percent from a year earlier in November, the fastest pace in 16 months, according to government data. The property market was a prime driver of the economy's 8.9 percent expansion in the third quarter.

An index tracking 33 property stocks on the Shanghai Composite has lost 11 percent this month, the most among the six industry groups, and paring its annual advance to 94 percent.

—Zhang Shidong. Editors: Richard Frost, Linus Chua

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net